Notably, each of Berkeley’s categories deliberately encompasses
multiple investment types that offer similar risk and correlation
profiles. The category definitions allow for the inclusion of hedge
funds, along with other similarly targeted investments, in multiple
segments of the portfolio. Table 6 highlights examples of subcategories that comingle hedge funds within or across higher-level categories or aggregations. Four subcategories involve groupings that
combine traditional fixed income and hedge fund investments.
16

Berkeley provides an unusual degree of elaboration about its novel
approach to asset category definition and how this approach supports its overall investment process (BEMCO 2014a, 2014c). In
particular, it describes how its asset categories mesh with its investing team’s organizational structure, with generalists working across
traditional boundaries to target opportunities fitting specific risk/
reward criteria.

Novel factor-inspired categories (UVA and others)

The University of Virginia (UVA) provides a typical example of cat-egory segmentation with three distinctive components (UVIMCO2014, 2015):• Growth, or equities, with investments spanning public equities,long/short equity strategies, and private equity, intended to pro-vide a core source of long-term return.

• Inflation, or real assets, along with inflation-linked fixed income
instruments such as Treasury inflation-protected securities
(TIPS), intended to perform well in inflationary environments
offsetting the impact of fixed income.

• Defensive, liquidity, or fixed income, often including credit or
macro/relative value hedge fund strategies, intended as a stable
core of the portfolio.

Table 7 compares UVA with four other endowments that follow
this three-prong structure, Cornell University, The Ohio State
University, University of Iowa, and University of Florida, along

Excess returnAssets that are intended to meaningfully outperform equitymarkets over the long-term with less emphasis on interimvolatility or liquidityPrivate equity, venture capital,higher volatility/less correlatedreal asset strategies, other

25.0%

Diversifying Assets that are intended to generate equity-like returns but with less correlation to or volatility than equity markets Absolute return, lower volatility/ less correlated real asset strate- gies, other 27.5%
Defensive Assets that are intended to preserve their value and liquidity across a variety of markets Treasuries, cash, and other lower volatility/less correlated strategies 10.0%